[New York Diary] The Fall of Intel and the Crisis of Samsung

Intel was the leading IT company that dominated the semiconductor market in the 1990s. Its influence was unrivaled, with a 90% market share in PC central processing units (CPUs). The slogan "Intel Inside," which implied that Intel semiconductors were found in all electronic devices, was a testament to the company's power at the time. However, its heyday did not last long. After the launch of the iPhone in 2007, Intel failed to adapt to the shift from PCs to mobile devices and began its decline. The company could not read the changes in the market, reduced its investment in research and development (R&D), and gradually lost its technological competitiveness. Once known as the "semiconductor king," Intel has now become a target for mergers and acquisitions (M&A), with mobile semiconductor powerhouse Qualcomm reportedly eyeing an acquisition.

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The rise and fall of Intel cannot be viewed as someone else's story, as it brings to mind Samsung Electronics. Recently, Korean business insiders in New York all speak in unison about the "Samsung Electronics crisis." The concerns about Samsung Electronics are not just about a single company but are rooted in fears that it could lead to a crisis for the entire Korean economy. Given that Samsung Electronics accounts for nearly 20% of Korea's exports, which are vital for the country's trade-dependent economy, these concerns are not an exaggeration.

The recent decline in Samsung Electronics' stock price and its poor third-quarter performance have fueled the ongoing crisis narrative both inside and outside the company. The worsening performance of the semiconductor division is intensifying these concerns. First, the consensus is that Chairman Lee Jae-yong's "System Semiconductor 2030" vision, announced in 2019 to surpass Taiwan's TSMC in the foundry (semiconductor contract manufacturing) sector by 2030, has become an unattainable goal. Samsung, which was at least one or two generations ahead of competitors in the DRAM market, has now fallen behind in high-bandwidth memory (HBM) and can no longer claim a process advantage even in general-purpose chips. Examining the market capitalization trend makes the crisis even more apparent. In November 2019, Samsung Electronics was surpassed by TSMC in market capitalization for the first time in history, and the gap between the two has now widened to an almost insurmountable level. As of October 18 (local time), TSMC's market capitalization stood at $1.0414 trillion (about 1,426.2 trillion won), roughly four times that of Samsung Electronics, which is at $258.5 billion (about 353.4 trillion won). While Samsung Electronics remains the global leader in smartphones, home appliances, and memory semiconductors, and second in the foundry sector-just as it was five years ago-the situation is now drastically different from 2019. What has happened to Samsung Electronics during this time?

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Both inside and outside the business community, there is analysis that Chairman Lee's legal risks have negatively impacted company-wide management and eroded Samsung Electronics' entrepreneurial spirit. Following the so-called "Choi Soon-sil state affairs scandal," Chairman Lee and the entire organization exhausted their energy dealing with legal risks. Over the past eight years, as Chairman Lee spent time in prison twice and focused on legal battles, Samsung's unique DNA of challenge and innovation disappeared. The advantages of owner-driven management, which enabled bold decisions, investments, and strategic focus, could no longer be exercised. In this process, risk management and self-preservation became dominant, leading to accumulating internal problems at Samsung Electronics. There are criticisms that financial experts, rather than engineers, have gained more influence, and the company has focused more on financial statements such as sales and operating profit than on maintaining a technological edge. In fact, when listing key executives who led Samsung Electronics' golden era, engineering graduates like Hwang Chang-gyu, Chin Dae-je, and Kwon Oh-hyun are mentioned first. Some also cite the weakening of work intensity due to the 52-hour workweek and management disruptions caused by the launch of the in-house labor union as major reasons. However, comparing this to SK Hynix, which continues to perform well under similar conditions, these are not considered the main causes.

In the "post-WTO" era, where protectionism and industrial policy are becoming the new normal, Samsung Electronics' role in the Korean economy is expected to grow even more. With all U.S. presidential candidates emphasizing "America First," Samsung Electronics' semiconductor competitiveness could serve as a powerful lever for Korea to secure an advantage in trade with the United States. Based on its overwhelming dominance in the memory semiconductor market and its advances in the foundry sector, Korea has been recognized as a key player in the global semiconductor supply chain alongside the United States, Japan, and Taiwan. In this context, if Samsung Electronics were to follow Intel's path of decline, the Korean economy would inevitably lose ground. This is why, even at the risk of being criticized for "favoring conglomerates," the government and business community must mobilize all available resources to support Samsung Electronics.